The Australian economy is, in many ways, truly remarkable. Though it started as a colony of the British Empire, this nation has quickly diverged and charted its own path and nowhere is this more evident than in the economy.
GDP or Gross Domestic Product is the best way to measure the size of a nation’s economy, as it is the value of all final goods and services produced within a country in a year. It is made up of 4 components - investment, consumption, government spending and net exports. Thus it covers all aspects of an economy and is the best way to gauge the productive powers of a state.
Going by these criteria, Australia has a GDP of $1.4 trillion in USD, which is the 14th largest in the world. This is despite its relatively small population of just 25 million - which means that on an individual basis, Australia is one of the wealthiest countries on Earth, and certainly one of the most stable economies for reasons which we shall now get into.
The Australian economy’s GDP per capita is $54,000, which for comparison, is more than that of the United Kingdom, France and Japan! On a per-capita basis, Australians are much more prosperous than most other nations. Combined with this is the extraordinary stability of the Australian economy, which has not experienced a recession in more than 28 years! This stellar performance of the Australian economy is because of several reasons, listed below.
Ever since the arrival of the First Fleet in 1788, immigration has been central to the Australian ethos. Australia is a nation of immigrants, as the indigenous Aboriginals make up a small portion of the modern Australian population these days. It can thus be said that Australia has descended from the ships, and that still holds true today.
Around 200,000 people migrate to Australia every year in search of economic prosperity, political freedom and a high standard of living. Today, more than 29% of the Australian population is composed of immigrants, a higher proportion than any other large country in the world!
Australia is thus one of the most diverse countries on Earth, with almost 10 million immigrants in its fold - one of the largest immigrant populations to be found anywhere! These days, most of the migrants are from England (4%), China (2.6%), India (2.4%), New Zealand (2.3%) and the Philippines (1.1%). Cities like Sydney and Melbourne are incredibly cosmopolitan and teeming with people born in other countries.
The first migrants to Australia were the British convicts who were deported to the Australian colonies as punishment were various offences. This, along with voluntary immigration of Scottish, English and Irish people, was the foundation of Australian society.
The 1850s witnessed an immigration boom, as gold was discovered in Victoria. Hundreds of thousands made their way to Australia to strike it rich, and Melbourne became one of the largest and richest cities in the world almost overnight.
This coincided with the end of penal transportation of convicts, and signalled a fundamental change in Australian demographics, as thousands of Chinese made their way to Australia too.
This migration of mostly British peoples to Australia continued over the decades until the onset of World War II. In this period, there was the birth of a distinct Australian ethnicity based on Anglo-Scottish-Celtic migrants combined with the growth of private land ownership and manufacturing.
In 1901, after the Federation of Australia into a single Commonwealth, Australia enacted the ‘White Australia’ policy, which remained in place till 1793, and restricted non-white immigration to Australia, especially from Asian and Pacific Islander countries. This policy was often criticized for being racist. Still, it resulted in scores of non-British Europeans making their way to the Land Down Under, including Greeks, Italians and other South Europeans.
After almost being invaded by Japan in World War II, Australia realized its vulnerability vis-a-vis its sparse population settlements. This resulted in the maxim ‘Populate or Perish’, where Australia became home to millions of immigrants in a bid to increase the Australian population, and decrease the nation’s weakness in this regard.
In 1973, the White Australia Policy was finally dismantled by the Australian, and a new Multicultural Australia Policy was implemented, which encouraged immigration from all countries regardless of race, language or religion. This was the basis of the modern Australian nation, which is renowned for its welcoming attitude to people of all nations.
Today, Asian countries make up the bulk of immigrants to Australia, mainly from countries such as India, China, Indonesia, Vietnam, Thailand, Philippines, and Bangladesh. Australia has a well-defined system for accepting immigrants.
There is today no discrimination based on race, ethnicity, language, religion or nationality for migrating to Australia. Those who are interested in moving to Oz should read the Australian citizenship guidelines thoroughly; however, as there is a stringent procedure regarding this set out in the law.
Immigrants have helped to enrich Australia in many different ways. Since mostly skilled migrants are taken in, they bring much needed human resources to the country, especially for sectors that are experiencing a labour shortage. Culturally, they add their own nation’s culture to that of Australia, which is visible in cuisine, attire and art. It has also been observed that migrants are very entrepreneurial and often start thriving businesses that provide employment.
Not to mention, the vast amounts of capital and investment that comes along with these migrants, as well as often closer ties with the country of origin, which functions as a sort of soft power. Thus, it is reasonably evident that the Australian economy is immigrant fuelled, and they are the reason for Australia’s prosperity and stability.
Trade is an extremely vital part of the Australian economy, especially as it has positioned itself as an exporter of raw materials and minerals to developing countries (especially China) while becoming a major importer of manufactured goods in return. In the last two decades, Australia has benefited tremendously from the industrialization of China as a supplier of essential commodities such as coal, grain, minerals and meat.
Historically, most of Australia’s trade used to be with Western countries. Before the federation of Australia, each colony was independent and traded with the British homeland separately. Even in those times, Australia was renowned as a significant supplier of raw materials like coal, metals, meat, wool and grain.
However, over the past hundred years, predominance in trade has slowly but steadily shifted several times, first from the United Kingdom of Great Britain to the United States of America, to Japan, and now, most recently, to the People’s Republic of China. These, in fact, reflect the shifting centre of gravity of the global economy over the years.
The Australian government has taken cognizance of the value of trade in Australia’s economic development and aimed to promote it even further through the signing of Free Trade Agreements. Australia has Free Trade Agreements with New Zealand, Singapore, Thailand, Chile, the United States, Malaysia, South Korea, Japan, China and ASEAN. Meanwhile, negotiations over trade deals are also ongoing with India, Indonesia and the European Union.
Australia is an exporter of mostly agricultural and mineral commodities such as iron ore, coal, gold, natural gas and oil, aluminium, copper, beef, meat, and wool. Most of these products are exported to China (32.6%) to feed its rapid industrialization - which caused a massive mining boom in Australia in the 2000s. Other significant markets for Australian exports include Japan (13.1%), South Korea (5.9%), USA (5.3%), India (4.9%) and New Zealand (3,4%).
In contrast to its exports, which mostly consist of raw or semi-processed industrial and agricultural commodities, Australia’s main imports are manufactured goods namely automobiles, telecom equipment, petroleum, computers, furniture, medicine and engineering equipment. Most of these come from industrialized or industrializing countries such as China (19.4%), America (12.3%), Japan (6.4%), Germany (4.5%), Thailand (4.1%) and the United Kingdom (4%).
As we can see, both in imports and exports, Australia’s largest trade partner is the People’s Republic of China, whose phenomenal economic growth over the last two decades was fuelled by Australian raw materials, and which in turn has brought great prosperity to Australia and created a boom in mining and agriculture. China is now the primary source of foreign investment in Oz, and economic ties between these two countries are now extremely close.
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As we can see, the Australian economy is truly impressive, having defied the odds several times over to grow for 28 years straight without an Australian economy recession. The Australian economy’s focus on immigration, exports, research and development and ease of doing business has allowed it to secure unprecedented prosperity and high standards of living for its citizens. This is along with a vibrant democracy, multicultural society and commitment to social justice, which have all led to Australia being consistently ranked as one of the best places in the world to live.
We hope you enjoyed this blog and learned a lot about the Australian economy. We regularly upload similarly interesting blogs and articles that you will surely love, so do keep watching this space for more! Thank you for reading!